STRENGTHS

WEAKNESSES

Dependency on the mining sector

High unemployment and persistent inequalities

Agricultural sector exposed to climatic hazards

Dependency on South Africa

RISK ASSESSMENT

A return to growth in sight

After two years of contraction, the economic, activity should pick up in 2019. The primary sector will drive growth, notably via agriculture and uranium mining. Production at the Husab uranium mine, the world's third-largest open-pit uranium mine, is expected to increase to full capacity in 2019, making it the third-largest uranium producer in the world (after Kazakhstan and Canada). In addition, offshore diamond production, which accounts for 75% of total production, will continue to increase. On the other hand, on-shore extraction is expected to decrease due to the depletion of terrestrial deposits. The Elizabeth Bay mine, for example, is not expected to supply diamonds beyond 2019 according to Namdeb, the company responsible for its operation.

The secondary sector is expected to stabilize. Although it will be supported by manufacturing industries and the water and electricity sector, its development will continue to be hampered by construction, the activity that suffered most during the recession and which is struggling to regain a positive momentum.

Tertiary sector activities will contribute to the rebound in growth, thanks to the recovery in consumption, which will stimulate trade. However, private consumption will continue to be constrained by continued very high unemployment (around 23% of the working population), and an inflation rate that will rise again in 2019. With the Namibian dollar anchored to the rand, the level of inflation will remain vulnerable to the volatility of the South African currency.

Difficult balance between supporting economic recovery and further fiscal consolidation

In 2019, the fiscal consolidation that began in 2015 will continue at a slower pace. The government will likely continue its efforts to reduce public spending, while at the same time endeavoring not to slow recovery. However, a budgetary slippage in the run-up to the presidential elections in November 2019 cannot be ruled out. In terms of tax revenue, reforms have been undertaken to improve the efficiency of their collection, as well as to broaden the tax base. The government is set to continue in this direction in 2019, in an attempt to compensate for the expected decline in customs revenues paid by the Southern African Custom Union (SACU). The ratio of public debt to GDP has continued to increase in recent years, but at a slower pace than in the past. However, a growing proportion of the debt is external (more than 40%), and therefore subject to exchange rate risk, particularly in the short term.

After declining in 2018, the current account deficit is expected to stabilize in 2019. Although still in deficit, the trade balance will benefit from the recovery of the mining sector, which is responsible for nearly 40% of the country's export earnings. Despite an oil price that will remain high in 2019, imports will increase to a lesser extent with domestic demand remaining weak. In addition, the strength of tourism will allow Namibia to record an increase in the surplus in the balance of services. Nevertheless, the expected decline in SACU customs revenues – as a result of weak regional growth – and higher income disbursements from FDI, will lead to a decrease in the surplus in the transfer and income balance. The inflow of capital and foreign investment will help to finance this current account deficit.

Hage Geingob: favourite candidate for the presidential elections

President Hage Geingob is well positioned for re-election in November 2019. His domination on the political scene was confirmed in 2017, with his election as the President of the South West African People's Organisation (SWAPO). The hegemony of this party, in power since independence (1990), should continue in the face of an opposition that is struggling to organise itself. However, the ultimately withdrawn provision of the National Economic Equitable Empowerment Bill that required a 25% stake in private companies for “previously disadvantaged people”, and the controversial issue of redistributing land to the benefit of black populations are illustrations of the political risk resulting from high inequality. President Geingob must find a balance between the pressures exerted by SWAPO members and part of the electorate, and the fragile economic context, as these provisions may frighten potential investors.

Inequalities in the distribution of land and capital also affect the business environment. In the absence of reforms, the country will continue to suffer a loss of competitiveness vis-à-vis its SADC competitors. In 2019, the country ranked 107th (out of 190 countries) in the Doing Business ranking.